The Competition (Criteria of Combination) Rules, 2024

These rules are the green channel rules. Notified by the Ministry of Corporate Affairs on 9 September 2024 under Section 63(2)(ac) and effective from 10 September 2024, they prescribe the criteria a transaction must satisfy before notice may be given under Section 6(4), which is the provision under which a combination is deemed approved on the date of filing. Their practical effect is to narrow the route, because they require overlaps to be mapped not only between the parties but across their group entities and affiliates.

1. The Green Channel and Its History

The green channel now rests on Section 6(4), inserted by the amendment of 2023, under which notice may be given for a combination meeting the prescribed criteria; Section 6(5) provides that on such filing and its acknowledgement the combination is deemed to have been approved under Section 31(1); and Section 6(6) permits the Commission, within the period in Section 20(1), to declare that approval void ab initio where the criteria are not met or the information is materially incorrect or incomplete, after hearing the parties. The route was introduced by amendment to the combination regulations in 2019, for transactions that cross the jurisdictional thresholds and therefore require a filing, but that raise no competition question because the parties do not overlap at all. Such a filing is a technical requirement rather than a substantive review, and making the parties wait for an order served no purpose. The mechanism was accordingly made automatic: on filing a notice under Section 6(4) in the prescribed form, the combination is deemed to have been approved. The rules of 2024 lift the criteria out of the regulations and place them in delegated legislation made by the Government.

2. The Criteria

A notice may be given under Section 6(4) where the parties to the combination, their respective group entities and their affiliates satisfy all of the following.

1. No horizontal overlap. They do not produce or provide similar or identical or substitutable products or services.
2. No vertical relationship. They are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in products or provision of services which are at a different stage or level of the production chain.
3. No complementary relationship. They are not engaged in activities that are complementary to each other.

The rules define an affiliate for this purpose by reference to a shareholding of ten per cent or more, or the right or ability to nominate a director or observer to the board, or access to commercially sensitive information. That definition is the operative change: a private equity acquirer with minority stakes across a sector may have affiliates that overlap with the target, and the route is then unavailable even though the acquirer itself does not compete with it.

3. Related Topics and Provisions